Live Oak, CA asked in Tax Law for California

Q: My house went to foreclosure what tax liability do I have on the loss statement from the mortgage company?

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1 Lawyer Answer
Ute Ferdig
Ute Ferdig
  • Newcastle, CA
  • Licensed in California

A: I just answered question that involves the cancelation of debt question in the context of a short sale. You can read the post here

Please note that the debt relief discussion only applies if the house that went to foreclosure was your principal residence.

If the property was an investment property, you may want to explore the insolvency exemption or if the loan was a purchase money loan, there was really no taxable debt cancellation as you are not personally liable for a purchase money loan (in CA) and therefore there really is no debt to cancel. You may want to read the following IRS article on debt cancellation,,id=174034,00.html

I hope this helps.

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